These comments are random, appearing only when some substantive change seems underway in the market or when a large number of readers start asking the same questions. Comments are flagged as "New" in the Table of Contents when the commentary changes.

Don't you love a cliche? First, a unique expression. Then repeated media popularization, then widespread common usage sinking into universal vulgarity. Truth to say, exuberance can never be 'irrational', flowing in great abundance as it does from a different, deeper wellspring of the human psyche--the spirit and emotions--rather than from the mere, dry rationality of mental operations.

Well, exuberance is back--if you look closely--which we are about to do--along with the re-emergence of animal spirits (an alternative cliche which still serves well--nice thing about many cliches: they become 9trite but remain apt). Now, we pick up where we left off in the last Occasional Commentary ninety days ago which addressed the question "when will this bear market be over?"

Money Flows provide the beginning of an answerclick here. These two portfolios, as you recall, are proxies for high tech stocks and internet stocks (and their respective related indexes as well as ETFs, QQQ and HHH) and vice versa. Notice the incongruences on this chart are the flip side of the mighty bull market top in March of 2002. (This chart will be updated continuously, more or less.)

An additional and independent factor which provides further evidence that animal spirits are now beginning to return to the market is the fact that this week for the first time since January 25, 2002, the speculative pair, QQQ and HHH, have together ranked higher than the conservative, more value-oriented pair, DIA and SPY (all heavily traded proxies for their respective indices). See the Strongest Stocks / This Week's Best page.

As you say in show biz, "This market has legs." If the crowd keeps coming, exuberance will grow apace--then surely, more mumblings from Washington about 'irrational'. An Iraqi war or lack of it, regime abdication, or UN capitulation have nothing to do with it. The instant event of any of these will only serve (as it always does) to accelerate, not reverse, those market trends already in progress.

Footnote. All phenomena are temporary--including this one. Recall my previous analysis of the long 36-year cycle . That hasn't changed.

Is it time for the market now to reach a selling climax and then embark on a new bull market? Maybe. Price momentum is now even more oversold then it was in August of 1982 when the stock market began a booming 1400% rise that lasted 20 years. (See momentum chart). Even the virtually identical three-dune pattern at the end of the current lengthy decline suggests the possibilty of a vigorous new bull market. But wait, not so fast.

I am, as you are, sceptical of such handy similarities, especially if they are only one of a kind. When we apply a vernier measure to the attractive price momentum, we find a different story. (See vernier chart). We find there was a beneficent divergence preceding the 1982 bottom. The dog barked. Twice, in fact. No such thing today in June, 2002.

It is quite likely that the vernier will need to make one or more upward slanting divergences with further price declines before the next bull arrives. When that dog barks . . . buy.

Moving closer to hand, one can see perhaps the early stages of this go-nowhere market commencing its long journey (see chart). Consider the price behavior since January 2000 as incipient confirmation of what the market will undergo for the next two decades or so--presumably with wondrous volatility now that the post "September 11" domestic environment has enlarged the potential for sudden unprecendentedly large shocks.

All of this can be considered quite normal as traditional measures like P/E ratios, dividend yields, book values, descend from nose-bleed heights to under-water bargains for value investors. This takes time, a lot of it--and several assaults. It will be a handsome market for 'traders' and a meager trip for 'investors' during the passage. Buy-and-hold and invest-for-the-long-run won't work unless you're talking 40 years or more.

RECONCILING THE BUYING GUIDE AND THE CURRENT MARKET
February 8, 2002

The bottom sections of This Week's Best are negative across the board while the Buying Guide is giving a positive indication for possibly a couple of years. What does this tell?

One is short-term, the other is long-term. In the current environment (a large trading range for another 10 to 20 years), more attention to the week-to-week trends expressed in the bottom tables on This Week's Best page and the Money Flows chart become more important to pay close attention to.

WINDS OF CHANGE--NASDAQ TO THE FORE
November 23, 2001

Since September 15, 2000, the leadership of the Market, such as it has been, had fallen to the classic, listed stocks of the old paradigm, which represented more esteemed value than the hurly-burly of high tech, internet, and other OTC companies--until today, that is.

The mutual funds are swollen with cash. Likewise customers' accounts at New York Stock Exchange member firms. And during October these were starting to be drawn down (the biggest drop in years)--likely for stock purchases, not consumer goods or debt reduction. There are vast tons of money in the system now, created by the Fed, $5.5 trillion--up 20% over a year ago, looking avariciously for places to go--alas, interest rates are so low. Stock market's the easiest venue. Just a phone call or click on the keyboard, and the money's in. Besides, they're moving up, eh?

Last night at dinner with friends, one said she had just bought a tech stock which sold for over $93 a share last year. She paid $2.50. This week it was over $6.

Things have the early feel of a mini-mania in the making. The next comments below point to the date of the possible high if that transpires.

As always, this cycle may be, and is, modified and exaggerated by the presence of other cycles and their harmonics. Thus, the magnitude of the September 21st apparent accuracy is without doubt due to the impact of another cycle phase coincident with that of the c100-week cycle which we are measuring here.

Last week's Conclusions, remain unchanged. "Based on prior market similarities, the best--and best preferred!--probabilities are: a strong decline early next week (that's this past week, September 17th to today) followed by a noticeable rise on large volume followed by a testing decline before the end of the year, followed by an even stronger rise into January, March, or possibly May. From that vantage, from then to now, will be opportune time to assess what will have transpired keeping in mind the continued, protracted, contributions of the 36- and 28-year cycles. If the recent, benchmark, March 30th-April 6th Money Flow lows are violated, the bear market will remain in force."

They were, and it does. Nevertheless, the foregoing scenario remains intact. And the course of the c36-year cycle appear to be unfolding parallel to similar junctures in prior episodes, more apparently like the 1892 sequence than the others. For investors, it will continue to be wise to keep firmly in mind the Money-Flow rules from the Summary in 'How to Use This Site'. For traders, Money-Flow weekly changes provide strong indications for the best direction in which to seek profits.

Yes and no. Enough time has gone by (18 months) and enough price decline has taken place in the NASDAQ100 (-70%) and the NASDAQ Composite (-65%) to amply qualify for an ending to their bear markets. Not so the Dow Jones Industrials (20 months, -16%), and a marginal qualification by Standard and Poor's 500 Composite Stock Index (18 months, -27%).

Positive indications for all three indexes surfaced this week. See the Money Flows chart and notice the divergences--new price lows, but no new lows in the Flows, including those of the All 100-stocks composite. These are mirror images of the incongruency examples describing the market tops early last year, q.v. The best expectancy now is to see vigorous new low prices next week, intraweek, say Monday or Tuesday (the Dow can drop to 8900 or lower--that would be sanguine--in both meanings of the word: bloody and optimistic) followed by a stirring rally, if not a new bull market.

"If not a new bull market"--there's the rub. That's the 'no' part of the answer to the headline question. Two things prerun the proven end of a bear decline. First, the character of the forthcoming rally, when it transpires, will go far in helping determine the probability of an ensuing bull. More important will be the character of the drop in prices which follows the rally. It must take place on a quite noticeable decline in volume for the new bull market to be confirmed. That done, the new bull is in place.

But none of this means that the nature of the new bull will have the extraordinary characteristics of the last long run from 1982, much less the last mad, glorious stretch from 1998. Remember and see the Archives article which, looking at the 36- and 28-year cycles, suggests many years of limited up and down markets ahead.

Nevertheless, it is salutary to see the quite evident Money Flow/price divergences across the board which emerged this week. They look positioned to continue.

Conclusion Based on prior market similarities, the best--and best preferred!--probabilities are: a strong decline early next week followed by a noticeable rise on large volume followed by a testing decline before the end of the year, followed by an even stronger rise into January, March, or possibly May. From that vantage, from then to now, will be opportune time to assess what will have transpired keeping in mind the continued, protracted, contributions of the 36- and 28-year cycles. If the recent, benchmark, March 30th-April 6th Money Flow lows are violated, the bear market will remain in force.

Contrary to simple observation, some do not believe in stock-market cycles. Or better put, they may believe, but that they believe cycles cannot be relied on. That has some justification. Once a visible recurrence of events is perceived in sequence, the recurrence suddenly fades, or worse, it flip flops upside down so that when you were expecting a rise you get a crash instead, and so on. My efforts are to find out by research what causes these apparent anomalies and eliminate them. See the new addition to Archives in the Market Timing section of the site.

ECONOMIC INDICATOR FORECASTS THE MARKET June 8, 2001

The Help-Wanted Advertising Index turns out to be an efficient predictor of new bull markets. See the new addition to Archives in the Market Timing section of the site.

In the lower part of This Week's Best table each week, I have added a section covering the recent ranking action of the four major tradeables on the site. Here is what it looks like.

EXCHANGE TRADED FUNDS (ETFs)

1=best 100=weakest

and CASH INDEX

Shorter Term

Rankings

prev

last

now

Symbol

Price

Source

DJ 30

22

27

26

26

24

25

DIA

110

100 stocks

NASDAQ 100

60

64

64

67

68

66

QQQ

49

100 stocks

SP 500

39

39

39

36

38

39

SPY

128

100 stocks

Internet Holders

61

62

59

56

55

51

HHH

48

100 stocks

Cash Index

59

66

74

73

76

78

---

---

100 stocks

I have no long history on this (unlike me). I would use the table to tell me which of the four tradeables is strongest at the moment and which are trending upward to take its place. In the "now" column (this week), DIA is strongest, SPY is second, HHH is third (!), QQQ is last. HHH is trending upward most strongly, rising 11 ranks in the last four weeks.

These will never rise to the very top nor fall to the bottom of their ranking hierarchy because they cannot exceed the best or worst of their component stocks.

I've included Cash here to round out the comparison of the broad stock markets with a risk-free investment in U.S. Treasury Bills. [Note--September 17, 2004--I have deleted Cash and substituted Semiconductors Holders, a volatile ETF (symbol SMH)]. The table above says, stocks win and their trend is improving weekly. To see the current table click here and scroll down. See more at How to Use.

Cash Index is a new experimental series placed this week near the bottom of the Internet Set portfolio tables. It is a measure of the yields on cash equivalents, in this case U.S. Treasury-Bill approximate money-market yields, versus the gains potential of stocks in the portfolio. In the rankings table, a high ranking (1 is the highest) means that bill yields are more profitable than stocks. A very low ranking means that stocks are preferable to cash equivalents.

Last week, PSINet announced that it was running out of cash and will likely declare bankruptcy. It has accordingly been removed from the Internet Set portfolio. No other internet companies currently qualify for listing. Therefore I decided to use the open slot for experimental observation of 'Cash Index'.

The most noteworthy event this week was the first early indication of a potential change for the better in the disturbing bear market which has generally prevailed since March of 2000. Observations:

1- Paradigm 2000 and Internet Set portfolios made new price lows below their January 5, 2001, lows while their weekly Money Flows did not. This is the first occasion of such incongruency since March, 2000. If the pattern continues into this coming April, and one or both ebb upward through their base lines, there is an excellent chance that a new bull market is emerging. To see what this means, inversely, look at the top in March 2000.

2- Classic Portfolio dominance in This Week's Best is waning. It peaked at 92% of the Source Portfolio listings in early January versus 62% now. Paradigm 2000 and Internet Set listings are up from 8% then to 37% now. That's where the animal spirits are. They are what it takes to make a bull market go. These may be starting now to emerge from a year of hibernation.

have been embarked on an uplift track for stocks since last October and last month when the trend of interest rates and the shape of the yield curve have turned positive respectively. This is one of those necessary but insufficient factors.

Conclusion Watch the level of Money Flows in April and May. If prices drop down further, but Money Flows hold above their January 5th lows, the highest probability is that a new bull market has started. If the Money Flows decline below January 5th levels, a serious bear market remains.